Abstract
It has become common to note the failure of neoclassical economics to explain economic divergence between countries and regions. In recent years this has frequently been attributed to some countries developing or capturing industries with increasing returns; i.e. that the agglomeration effects typical of increasing returns industries are sensitive to slight differences in initial conditions that over time lead to further agglomeration and thus increasing divergence rather than convergence between regions and countries (Romer 1986, Krugman and Venables 1995, Fujita and Thisse 2002). Just as the lack of short-term convergence among modern economies can be attributed to the capturing of increasing returns-to-scale activities, many believe Europe (and its settler colonies) did this on a long-term, global scale as well, in a global division of labor at the state and regional level. In the economic history literature this process is sometimes explained in other language, i.e., that Europe deindustrialized its colonies e.g., in dependency theory in general, and works such as Amin 1976, Forbes and Rimmer 1984, and Alam 2000. This long-term, increasing returns perspective is interesting because it can be seen as (regarding reasons proposed for the ‘great divergence’ in levels of development that economic historians now tell us happened mainly in the last few centuries) merging or at least compatible with both many recent mainstream economic observations related to regional economics, agglomeration, and increasing returns-to-scale activities (‘new’ trade theory) and aspects of important heterodox arguments (Marxist/dependency theories, some Austrian economics, and much evolutionary economics - related to competition, for example). How, then, did European states rise in the international division of labor?
Highlights
Based on these observations this work might be described as a ‘geography of mercantilism’ that seeks to understand how mercantilist policies, so intricately associated with both the military and commercial expansion of Europe that subsequently shaped global patterns of development, became spatially ‘centered’, as writers such as Blaut and A.G
There seem to be at least three factors that are necessary for mercantilist policies to develop in a world region: 1) There must be a high amount of trade 2) there must be a sufficient number of states to stimulate competition among them 3) they must be sufficiently centralized, bureaucratically effective states
First we examine modern data that shows that in the modern economy there is a close connection between economic development and the types of economies mercantilists believed to be conducive to economic growth
Summary
It has become common to note the failure of neoclassical economics to explain economic divergence between countries and regions. It has seldom been grasped how fundamentally this influenced the interpretation of economic theory in different countries, especially in the English speaking countries vis-à-vis the rest of the world (Reinert 1998) Another misunderstanding concerning mercantilist policies is that they are frequently portrayed as attempting to capture trade and industry due to a naïve belief that these are a ‘zero sum game’ when in reality trade and industrial growth are very much a non-zero sum game, with cooperative free trade increasing the total amount of goods for all. In a non-zero sum world of increasing returns and agglomeration, mercantilist strategies were especially astute and beneficial, only, for the ‘winners’ Based on these observations this work might be described as a ‘geography of mercantilism’ that seeks to understand how mercantilist policies, so intricately associated with both the military and commercial expansion of Europe that subsequently shaped global patterns of development, became spatially ‘centered’, as writers such as Blaut and A.G. Frank often characterize the process, on Europe
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